From SBI to Zomato: Jefferies bets on these 11 stocks for the next five years

Jefferies believes that India's Gross Domestic Product (GDP) over the next four years will likely touch $5 trillion and lay the foundation for a long-term GDP growth of 7%.

"Consistent and fast-growing domestic flows will likely complement FPI inflows to sustain the Indian market performance," the note said.

Jefferies termed Amber Enterprises a key beneficiary of India's manufacturing growth story. It is also the brokerage's top pick within the small and midcap space. Amber's core competency in ACs and diversification into components, with support from the PLI scheme, will drive a Compound Annual Growth Rate of 36% over the financial years 2024 to 2030 in terms of earnings.

Ambuja Cements, the second-largest cement producer in the country, is poised to deliver strong operating outperformance over most of its peers led by capacity expansion, volume scale-up, better efficiency, and ESG, according to Jefferies. The company's strong balance sheet will also help in its expansion. "Consolidation will be positive for pricing over the long-term," the Jefferies note said.

Axis Bank is likely to deliver an Earnings Per Share (EPS) CAGR of 18% over the financial years 2024 to 2029. Jefferies believes that is possible due to an improvement in deposit franchises, the ramp-up of digital and lending platforms and a ramp-up of its subsidiaries. "Platforms for hyper-personalisation, SME and rural loans will aid growth in loans," Jefferies said, adding that the integration of Citibank India will bring cost and revenue synergies. The brokerages said that valuations also have a scope to re-rate.

Jefferies sees that Bharti Airtel is in a sweet spot due to its consistent market share gains, improving the pricing environment with sufficient room for improvements in Average Revenue Per User (ARPU). It expects Bharti Airtel to deliver a 12% to 13% CAGR over the financial years 2024 to 2030 in its India revenue or EBITDA, driven by market share gains and improving average revenue per user (ARPU). Consistent Free Cash Flow generation will shift valuation benchmarks to Free Cash Flow Yields.

JSW Energy is likely to see three triggers play out over the next 12-24 months, according to Jefferies. One is improving visibility on Renewable Energy moving to 81% of its capacity from 52% currently, the commissioning of a 700 MW merchant capacity in peak power deficit times and progress on India's first green hydrogen plants and energy storage battery unit. "In the medium-term, the company's timely execution and prudent cash flow utilisation will keep multiples elevated and create further shareholder value," the note said.

L&T is a key beneficiary of India's capex upcycle, according to Jefferies. It expects a 25% EPS CAGR and an 18% to 20% Return on Equity to drive further upsides from current levels. "Medium-term, re-rating is also possible as EPS growth remains over 15% with surplus cash flow being given back to shareholders," Jefferies said. Management not following prudent capital allocation, and weak government spending on infrastructure are some key risks.

The current housing capex upcycle makes Macrotech a key beneficiary of the same. It also has a large 600 million square feet township landbank in Mumbai's suburbs, which is seeing rapid infrastructure development. A reset in land values at its township land, and expansion to new geographies driving a 15% to 20% medium-term pre-sales CAGR, are the key valuation drivers, according to Jefferies.

Sustained growth momentum in the hospital business can make Max Healthcare a potentially 2.5x stock in five years, as per Jefferies. The brokerage expects the stock to report a 20% EBITDA CAGR during the financial years 2024 to 2030 as new brownfield beds get added and most of them breakeven in less than 12-15 months. High growth, strong execution capabilities, unrivalled track record and best-in-class financials and operating metrics will sustain the company's high growth multiples, Jefferies said. Construction delays, slower ramp-up and overpriced acquisitions are some key risk factors.

Jefferies expects SBI to leverage its strong deposit franchise, improved digital offerings and leadership across lending segments to deliver a 13% loan CAGR over the next five years. The bank's ability to raise capital will be a key growth driver, according to Jefferies. SBI can also monetise its stake in its subsidiaries and valuations also have a scope to re-rate, the brokerage note said. Jefferies rates SBI among its top PSU picks.

"TVS should be a key beneficiary of revival in Indian two-wheeler demand from an abnormally cyclical trough," the Jefferies note said. TVS has also narrowed the profitability gap with its peers with its attractive product proposition and market share gains across multiple segments. However, rising investments in overseas entities, where the company has shared few details on strategy and outlook is a concern for Jefferies. It sees strong earnings growth ahead for TVS.

Jefferies called Zomato a "compelling food delivery play." Food delivery continues to offer strong growth potential and a stable industry structure should continue to drive profitability in the near term, according to Jefferies. Zomato is also expecting an EBITDA break-even for Blinkit by June 2024. It is also expecting the profit pool of Zomato to become increasingly visible over the next five years. "As the franchise generates strong free cash flows, capital allocation will be a key factor to watch," the note said.